Do Publicly Owned, Planned Economies Work?

The Soviet Union was a concrete example of what a publicly owned, planned economy could produce: full employment, guaranteed pensions, paid maternity leave, limits on working hours, free healthcare and education (including higher education), subsidized vacations, inexpensive housing, low-cost childcare, subsidized public transportation, and rough income equality. Most of us want these benefits. However, are they achievable permanently? It is widely believed that while the Soviet Union may have produced these benefits, in the end, Soviet public ownership and planning proved to be unworkable. Otherwise, how to account for the country’s demise? Yet, when the Soviet economy was publicly owned and planned, from 1928 to 1989, it reliably expanded from year to year, except during the war years. To be clear, while capitalist economies plunged into a major depression and reliably lapsed into recessions every few years, the Soviet economy just as unfailingly did not, expanding unremittingly and always providing jobs for all. Far from being unworkable, the Soviet Union’s publicly owned and planned economy succeeded remarkably well. What was unworkable was capitalism, with its occasional depressions, regular recessions, mass unemployment, and extremes of wealth and poverty, all the more evident today as capitalist economies contract or limp along, condemning numberless people to forced idleness. What eventually led to the Soviet Union’s demise was the accumulated toll on the Soviet economy of the West’s efforts to bring it down, the Reagan administration’s intensification of the Cold War, and the Soviet leadership’s inability to find a way out of the predicament these developments occasioned.

Every year, from 1928 to 1989, except during the war years, the publicly owned, planned Soviet economy reliably expanded, providing jobs, shelter, and a wide array of low- and no-cost public services to all, while capitalist economies regularly sank into recession and had to continually struggle out of them on the wreckage of human lives.

By the 1980s, the USSR was showing the strains of the Cold War. Its economy was growing, but at slower pace than it had in the past. Military competition with its ideological competitor, the United States, had slowed growth in multiple ways. First, R&D resources were being monopolized by the military, starving the civilian economy of the best scientists, engineers, and machine tools. Second, military spending had increased to meet the Reagan administration’s abandonment of detente in favour of a renewed arms race that was explicitly targeted at crippling the Soviet economy. To deter US aggression, the Soviets spent a punishingly large percentage of GDP on the military while the Americans, with a larger economy, spent more in absolute terms but at a lower and more manageable share of national income. Third, to protect itself from the dangers of relying on foreign imports of important raw materials that could be cut off to bring the country to its knees, the Soviet Union chose to extract raw materials from its own vast territory. While making the USSR self-sufficient, internal sourcing ensnared the country in a Ricardian trap. The costs of producing raw materials increased, as new and more difficult-to-reach sources needed to be tapped as the older, easy-to-reach ones were exhausted. Fourth, in order to better defend the country, the Soviets sought allies in Eastern Europe and the Third World. However, because the USSR was richer than the countries and movements it allied with, it became the anchor and banker to other socialist countries, liberation movements, and states seeking to free themselves from despoliation by Western powers. As the number of its allies increased, and Washington manoeuvred to arm, finance, and support anti-communist insurgencies in an attempt to put added strain on the Soviet treasury, the costs to Moscow of supporting its allies mounted. These factors—corollaries of the need to provide for the Soviet Union’s defence—combined to push costs to the point where they seriously impeded Soviet economic growth.

With growth slowing, and the costs of defending the country increasing, it appeared as if it was only a matter of time before the USSR would find itself between the Scylla of an untenable military position and the Charybdis of arms race-driven bankruptcy. Mikhail Gorbachev, the country’s last leader, faced a dilemma: he could either bankrupt the economy by trying to keep pace with the Americans on arms spending or withdraw from the race altogether. Gorbachev chose the latter. He moved to end the Cold War, withdrawing military support from allies, and pledging cooperation with the United States. On the economic front, he set out to transform the Soviet Union into a Western-style social democracy. However, rather than rescuing the country from a future of ever slowing economic growth, Gorbachev’s capitulations on foreign and economic policy led to disaster. With the restraining hand of the Soviet Union lifted, the United States embarked on a series of aggressions around the world, beginning with Iraq, proceeding to Yugoslavia, Afghanistan, Iraq again, and then Libya, with numerous smaller interventions in between. Gorbachev’s abandonment of economic planning and efforts to clear the way for the implementation of a market economy pushed the country into crisis. Within five years, Russia was an economic basket case. Unemployment, homelessness, economic insecurity and social parasitism (living off the labour of others) returned with a vengeance.

On Christmas Day, 1991, the day the USSR officially ended, Gorbachev said, “We live in a new world. The Cold War is finished. The arms race and the mad militarization of states, which deformed our economy, society and values, have been stopped. The threat of world war has been lifted” (Roberts, 1999). This made Gorbachev wildly popular in the West. Russians were less enthusiastic. Contained within Gorbachev’s words was the truth about why the world’s first conscious attempt to build an alternative to capitalism had been brought to a close. It was not because the Soviet economic system had proved unworkable. On the contrary, it had worked better than capitalism. The real reason for the USSR’s demise was that its leadership capitulated to an American foe, which, from the end of World War II, and with growing vigour during the Reagan years, sought to arms race to death the Soviet economy. This was an economy that worked for the bottom 99 percent, and therefore, if allowed to thrive, would have discredited the privately owned, market-regulated economies that the top one percent favoured and benefited from. It was this model of free enterprise and market regulation which made vast wealth, security and comfort the prerogatives of captains of industry and titans of finance, and unemployment, poverty, hunger, economic insecurity, and indignity—the necessary conditions of the top one percent’s riches—the lot of everyone else.

The 21 years since the defeat of the USSR have not been kind. Stalin, under whose tutelage the world’s first publicly owned, planned economy was built, once issued a prophetic warning: “What would happen if capitalism succeeded in smashing the Republic of Soviets? There would set in an era of the blackest reaction in all the capitalist and colonial countries. The working class and the oppressed peoples would be seized by the throat, the positions of international communism would be lost” (Stalin, 1954). And just as Stalin had accurately prophesied 10 years before Operation Barbarossa, the Nazi invasion of the USSR, that his country had only 10 years to prepare for an attack, so too did he accurately foresee the consequences of the Soviet Union’s falling to the forces of capitalism. An era of the blackest reaction has, indeed, set in. Washington now has more latitude to use its muscular military to pursue its reactionary agenda around the world. Public ownership and planning hang on in Cuba and North Korea, but the United States and its allies use sanctions, diplomatic isolation and military harassment to sabotage the economies of the hold-outs (as they did the Soviet economy), so that the consequences can be falsely hung on what are alleged to be the deficiencies of public ownership and planning. They are in reality the consequences of a methodical program of low-level warfare. Encouraged to believe that the Soviet economic system had failed, many people, including both communist supporters and detractors of the Soviet Union, concluded that a system of public ownership and planning is inherently flawed. Communists abandoned communist parties for social democratic ones, or abandoned radical politics altogether. Social democrats shifted right, eschewing reform, and embracing neo-liberalism. In addition, Western governments, no longer needing to blunt the appeal of public ownership and planning, abandoned the public policy goal of full employment and declared robust public services to be no longer affordable (Kotz, 2001). At the same time, privatization in the former Soviet Union and formerly communist countries of Eastern Europe expanded the global supply of wage-labour, with predictable consequences for wage levels worldwide. The Soviet Union’s defeat has ushered in a heyday for capital. For the rest of us, our throats, as Stalin warned, have been seized.

The world’s largest capitalist economies have been in crisis since 2008. Some are trapped in an austerity death-spiral, some in the grips of recession, most growing slowly at best. Austerity—in reality the gutting of public services—is the prescribed pseudo-remedy. There is no end in sight. In some parts of Europe, official unemployment reaches well into the double-digits, youth unemployment higher still. In Greece, a country of 11 million, there are only 3.7 million employed (Walker and Kakaounaki, 2012). Moreover, the crisis can in no way be traced to an outside power systematically working to bring about capitalism’s demise, as the United States and its allies systematically worked to bring about the end of public ownership and planning in the USSR. Yet, free to develop without the encumbrance of an organized effort to sabotage it, capitalism is not working. Few point this out. By contrast, the Soviet model of public ownership and planning—which, from its inception was the target of a concerted effort to undermine it—never once, except during the extraordinary years of World War II, stumbled into recession, nor failed to provide full employment. Yet it is understood, including by some former supporters of the Soviet Union, to have been unworkable. Contrary to a widely held misconception, the experience of the Soviet Union did not demonstrate that an inherent weakness existed within its publicly owned, planned economy that doomed it to failure. It demonstrated, instead, the very opposite—that public ownership and planning could do what capitalism could not do: produce unremitting economic growth, full employment, an extensive array of free and nearly free public services, and a fairly egalitarian distribution of income. Moreover, it could do so year after year and continued to do so until the Soviet leadership pulled the plug. It also demonstrated that the top one percent would defend private ownership by using military, economic, and ideological means to crush a system that worked against them but worked splendidly for the bottom 99 percent (an effort that carries on today against Cuba and North Korea.)

The defeat of the Soviet Union has, indeed, ushered in a period of dark reaction. The way out remains, as ever, public ownership and planning—which the Soviet experience from 1928 to 1989 demonstrates works remarkably well—and struggle against those who would discredit, degrade or destroy it.

What Soviet public ownership and planning did for ordinary citizens of the USSR

The benefits of the Soviet economic system were found in the elimination of the ills of capitalism—an end to unemployment, inflation, depressions and recessions, and extremes of wealth and poverty; an end to exploitation, which is to say, the practice of living off the labour of others; and the provision of a wide array of free and virtually free public services.

Among the most important accomplishments of the Soviet economy was the abolition of unemployment. Not only did the Soviet Union provide jobs for all, work was considered a social obligation, of such importance that it was enshrined in the constitution. The 1936 constitution stipulated that “citizens of the USSR have the right to work, that is, are guaranteed the right to employment and payment for their work in accordance with quantity and quality.” On the other hand, making a living through means other than work was prohibited. Hence, deriving an income from rent, profits, speculation or the black market – social parasitism – was illegal (Szymanski, 1984). Finding a job was easy, because labour was typically in short supply. Consequently, employees had a high degree of bargaining power on the job, with obvious benefits in job security, and management paying close attention to employee satisfaction (Kotz, 2003).

Article 41 of the 1977 constitution capped the workweek at 41 hours. Workers on night shift worked seven hours but received full (eight-hour) shift pay. Workers employed at dangerous jobs (e.g., mining) or where sustained alertness was critical (e.g. physicians) worked six or seven-hour shifts, but received fulltime pay. Overtime work was prohibited except under special circumstances (Szymanski, 1984).

From the 1960s, employees received an average of one month of vacation (Keeran and Kenny, 2004; Szymanski, 1984) which could be taken at subsidized resorts (Kotz, 2003).

All Soviet citizens were provided a retirement income, men at the age of 60, and women at the age of 55 (Lerouge, 2010). The right to a pension (as well as disability benefits) was guaranteed by the Soviet constitution (Article 43, 1977), rather than being revocable and subject to the momentary whims of politicians, as is the case in capitalist countries.

That US citizens had to pay for their healthcare was considered extremely barbaric in the Soviet Union, and Soviet citizens “often questioned US tourists quite incredulously on this point.”

Women were granted maternity leave from their jobs with full pay as early as 1936 and this, too, along with many other benefits, was guaranteed in the Soviet constitution (Article 122, 1936). At the same time, the 1936 constitution made provision for a wide network of maternity homes, nurseries and kindergartens, while the revised 1977 constitution obligated the state to help “the family by providing and developing a broad system of childcare…by paying grants on the birth of a child, by providing children’s allowances and benefits for large families” (Article 53). The Soviet Union was the first country to develop public childcare (Szymanski, 1984).

Women in the USSR were accorded equal rights with men in all spheres of economic, state, cultural, social and political life (Article 122, 1936), including the equal right with men to employment, rest and leisure, social insurance and education. Among its many firsts, the USSR was the first country to legalize abortions, which were available at no cost (Sherman, 1969). It was also the first country to bring women into top government positions. An intense campaign was undertaken in Soviet Central Asia to liberate women from the misogynist oppression of conservative Islam. This produced a radical transformation of the condition of women’s lives in these areas (Szymanski, 1984).

The right to housing was guaranteed under a 1977 constitutional provision (Article 44). Urban housing space, however, was cramped, about half of what it was per capita in Austria and West Germany. The reasons were inadequate building in Tsarist times, the massive destruction of housing during World War II, and Soviet emphasis on heavy industry. Prior to the October Revolution, inadequate urban housing was built for ordinary people. After the revolution, new housing was built, but the housing stock remained insufficient. Housing draws heavily on capital, which the government needed urgently for the construction of industry. In addition, Nazi invaders destroyed one-third to one-half of Soviet dwellings during the Second World War (Sherman, 1969).

City-dwellers typically lived in apartment buildings owned by the enterprise in which they worked or by the local government. Rents were dirt cheap by law, about two to three percent of the family budget, while utilities were four to five percent (Szymanski, 1984; Keeran and Kenny, 2004). This differed sharply with the United States, where rents consumed a significant share of the average family budget (Szymanski, 1984), and still do.

Food staples and other necessities were subsidized, while luxury items were sold well above their costs.

Public transportation was efficient, extensive, and practically free. Subway fare was about eight cents in the 1970s, unchanged from the 1930s (Szymanski, 1984). Nothing comparable has ever existed in capitalist countries. This is because efficient, affordable and extensive public transportation would severely limit the profit-making opportunities of automobile manufacturers, petroleum companies, and civil engineering firms. In order to safeguard their profits, these firms use their wealth, connections and influence to stymie development of extensive, efficient and inexpensive public alternatives to private transportation. Governments, which need to keep private industry happy so that it continues to provide jobs, are constrained to play along. The only way to alter this is to bring capital under public control, in order to use it to meet public policy goals set out in a consciously constructed plan.

The Soviet Union placed greater stress on healthcare than their capitalist competitors did. No other country had more physicians per capita or more hospital beds per capita than the USSR. In 1977, the Soviet Union had 35 doctors and 212 hospital beds per 10,000 compared to 18 doctors and 63 hospital beds in the United States (Szymanski, 1984). Most important, healthcare was free. That US citizens had to pay for their healthcare was considered extremely barbaric in the Soviet Union, and Soviet citizens “often questioned US tourists quite incredulously on this point” (Sherman, 1969).

Education through university was also free, and stipends were available for post-secondary students, adequate to pay for textbooks, room and board, and other expenses (Sherman, 1969; Szymanski, 1984).

Income inequality in the Soviet Union was mild compared to capitalist countries. The difference between the highest income and the average wage was equivalent to the difference between the income of a physician in the United States and an average worker, about 8 to 10 times higher (Szymanski, 1984). The elite’s higher incomes afforded privileges no greater than being able to acquire a modest house and car (Kotz, 2000). By comparison, in 2010, Canada’s top-paid 100 CEOs received incomes 155 times higher than the average full-time wage. The average full-time wage was $43,000 (Canadian Centre for Policy Alternatives, 2011). An income 10 times larger would be $430,000—about what members of the capitalist elite make in a single week. A factor that mitigated the modest degree of Soviet income inequality was the access all Soviet citizens had to essential services at no, or virtually, no cost. Accordingly, the degree of material inequality was even smaller than the degree of income inequality (Szymanski, 1984).

Soviet leaders did not live in the opulent mansions that are the commonplace residences of presidents, prime ministers and monarchs in most of the world’s capitals (Parenti, 1997). Gorbachev, for example, lived in a four-family apartment building. Leningrad’s top construction official lived in a one-bedroom apartment, while the top political official in Minsk, his wife, daughter and son-in-law inhabited a two-bedroom apartment (Kotz and Weir, 1997). Critics of the Soviet Union accused the elite of being an exploiting ruling class, but the elite’s modest incomes and humble material circumstances raise serious doubt about this assessment. If it was indeed an exploiting ruling class, it was the oddest one in human history.

The Soviet economy’s record of growth under public ownership and planning

From the moment in 1928 that the Soviet economy became publicly owned and planned, to the point in 1989 that the economy was pushed in a free market direction, Soviet GDP per capita growth exceeded that of all other countries but Japan, South Korea and Taiwan. GDP per person grew by a factor of 5.2, compared to 4.0 for Western Europe and 3.3 for the Western European offshoots (the USA, Canada, Australia and New Zealand) (Allen, 2003). In other words, over the period in which its publicly owned, planned economy was in place, the USSR‘s record in raising incomes was better than that of the major industrialized capitalist countries. The Soviet Union’s robust growth over this period is all the more impressive considering that the period includes the war years when a major assault by Nazi Germany left a trail of utter destruction in its wake. The German invaders destroyed over 1,500 cities and towns, along with 70,000 villages, 31,000 factories, and nearly 100 million head of livestock (Leffler, 1994). Growth was highest to 1970, at which point expansion of the Soviet economy began to slow. However, even during this so-called (and misnamed) post-1970 period of stagnation, GDP per capita grew 27 percent (Allen, 2003).

The i-Phone. Produced by free enterprise? Guess again.

While Soviet GDP per capita growth rates compare favorably with those of the major capitalist economies, a more relevant comparison is with the rest of the world. In 1928, the Soviet Union was still largely an agrarian country, and most people worked in agriculture, compared to a minority in Western Europe and North America. Hence, the economy of the USSR at the point of its transition to public ownership and planning was very different from that of the industrialized Western capitalist countries. On the other hand, the rest of the world resembled the Soviet Union in also being largely agrarian (Allen, 2003). It is therefore the rest of the world, not the United States and other advanced industrialized countries, with which the USSR should be compared. From 1928 to 1989, Soviet GDP per capita not only exceeded growth in the rich countries but exceeded growth in all other regions of the world combined, and to a greater degree. Hence, not only did the publicly owned, planned economy of the Soviet Union outpace the economies of richer capitalist economies, it grew even faster than the economies of countries that were most like the USSR in 1928. For example, outside its southern core, Latin America’s GDP per capita was $1,332 (1990 US dollars), almost equal to the USSR’s $1,370. By 1989, the Latin American figure had reached $4,886, but average income in the Soviet Union had climbed far higher, to $7,078 (Allen, 2003). Public ownership and planning had raised living standards to a higher level than capitalism had in Latin America, despite an equal starting point. Moreover, while the Soviet peacetime economy unfailingly expanded, the Latin American economy grew in fits and starts, with enterprises regularly shuttering their doors and laying off employees.

Perhaps the best illustration of how public ownership and planning performed better at raising living standards comes from a comparison of incomes in Soviet Central Asia with those of neighboring countries in the Middle East and South Asia. In 1928, these areas were in a pristinely pre-industrial state. Under public ownership and planning, incomes grew in Soviet Central Asia to $5,257 per annum by 1989, 32 percent higher than in neighboring capitalist Turkey, 44 percent higher than in neighboring capitalist Iran, and 241 percent higher than in neighboring capitalist Pakistan (Allen, 2003). For Central Asians, it was clear on which side of the Soviet Union’s border standards of living were highest.

US emulation of Soviet public funding of R&D

Advocates of a free enterprise economy would have you believe that public ownership and planning stifle innovation, while free enterprise encourages it. If that is the case, how do we explain:

• That the Soviet Union beat the United States into space in the 1950s, piling up a record of firsts in space exploration, and consequently setting off a panic in Washington?
• Most of the innovations in the United States, from the internet to Google’s search engine algorithm to advanced drugs and the i-Phone, are based, not on private investment, but government funding?

In fact, the truth about innovation is the exact opposite of what free-enterprise promoters would have us believe. It is not free enterprise, but planning and public funds, that drive it.

Soviet accomplishments in space, considered in light of the mistaken view that the USSR was always a poor second-best to the supposedly more dynamic United States, is truly startling. Soviet achievements include the first satellite, first animal in orbit, first human in orbit, first woman in orbit, first spacewalk, first moon impact, first image of the far side of the moon, first unmanned lunar soft landing, first space rover, first space station and first interplanetary probe. The panic created in Washington after the allegedly innovation-stifling Soviet economy allowed the USSR to beat its much richer ideological rival into space galvanized the United States to take a leaf from the Soviet book. Just as the Soviets were doing, Washington would use public funds to power research into innovations. This would be done through the Defense Advanced Research Projects Agency. The DARPA would channel public money to scientists and engineers for military, space and other research. Many of the innovations to come out of the DARPA pipeline would eventually make their way to private investors, who would use them for private profit (Mazzucato, 2011). In this way, private investors were spared the trouble of risking their own capital, as free enterprise mythology would have us believe they do. In this myth, far-seeing and bold capitalists reap handsome profits as a reward for risking their capital on research that might never pay-off. Except this is not how it works. It is far better for investors to invest their capital in ventures with less risk and quicker returns, while allowing the public to shoulder the burden of funding R&D with its many risks and uncertainties. Using their wealth, influence and connections, investors have successfully pressed politicians into putting this pleasing arrangement in place. Free enterprise reality, then, is based on the sucker system: Risk is “socialized” (i.e., borne by the public, the suckers) while benefits are “privatized” (by investors who have manipulated politicians into shifting to the public the burden of funding R&D.)

A study by Block and Keller (2008) found that between 1971 and 2006, 77 out of R&D Magazine’s top 88 innovations had been fully funded by the US government. Summarizing research by economist Mariana Mazzucato, Guardian columnist Seumas Milne (2012) points out that the

[a]lgorithms that underpinned Google’s success were funded by the public sector. The technology in the Apple iPhone was invented in the public sector. In both the US and Britain it was the state, not big pharma, that funded most groundbreaking ‘new molecular entity’ drugs, with the private sector then developing slight variations. And in Finland, it was the public sector that funded the early development of Nokia – and made a return on its investment.

Nuclear power, satellite and rocket technology, and the internet are other examples of innovations that were produced with public money, and have since been used for private profit. US president Barack Obama acknowledged the nature of the swindle in his 2011 State of the Nation Address. “Our free-enterprise system,” began the president, “is what drives innovation.” However, he immediately contradicted himself by saying, “But because it’s not always profitable for companies to invest in basic research, throughout history our government has provided cutting-edge scientists and inventors with the support that they need.”

All of this points to two important facts. (1) The United States kick-started innovation in its economy by emulating the Soviet model of state-directed research because free enterprise was not up to the task. (2) Rather than emulate the Soviet model for public benefit, the United States channels public money into R&D for private profit. From the second point can be inferred a third: The fact that the Soviets socialized the benefits that flow from socialized risk, while the United States privatizes them, reflects the antagonistic nature of the two societies: One, a mass-oriented society organized to benefit the masses; the other, a business society organized to benefit a minority of business owners. Capitalism, as the US president acknowledges, does not promote innovation, because “it is not always profitable for companies to invest in basic research.” On the other hand, state-directed funding is the source of innovation. Clearly, then, a political agenda has nurtured two myths: (a) That a system of public ownership and planning stifles innovation; (b) That the profit system stimulates it.

Why growth slowed

While the Soviet economy grew rapidly from 1928 to 1989 it never surpassed the economies of North America, Western Europe and Japan. Consequently, the USSR’s per capita income was always less than that of the industrialized capitalist economies. The comparative disadvantage in incomes and living standards was falsely attributed to the alleged inefficiencies of public ownership and planning, rather than to the reality that, having started further back than the rich capitalist countries, the Soviet Union had more ground to cover. When the race began in 1928, the Soviet Union was still a largely agrarian country while the United States was industrialized. Hence, the Soviet Union had to cover ground the United States had already covered when Russia was under the stifling rule of Tsarist tyranny. Moreover, it had to do so without riches extracted from other countries, as the United States, Britain, France and Japan had based part of their prosperity on exploiting their own formal and informal empires (Murphy, 2000). True, the USSR did have an empire of sorts—countries in Eastern Europe over which it exercised hegemony, but, except in the early post-WWII years, these countries were never exploited economically by the Soviet Union. If anything, the Soviets, who exported raw materials to Eastern Europe in return for manufactured goods, came out on the losing end of its trade relationship with its satellites. So long as they remained part of the Warsaw Pact—a defensive alliance formed after and in response to the creation of NATO—and maintained some semblance of public ownership and planning, Moscow allowed its Eastern European allies to chart their own course. Soviet hegemony, then, was limited to enforcing these two conditions (Szymanski, 1979).

By the mid-1970s there was serious concern in Washington that the Soviet economy was on a course to overtake that of the United States. Since Washington always pointed to the United States’ greater average income and higher living standards to mobilize the allegiance of its population to the free enterprise system, a Soviet lead would deal a mortal blow to the legitimacy of US capitalism. Careful estimates prepared in the United States showed that Soviet gross national product was gaining on that of the United States. In 1950, the Soviet economy was only one-third the size of the US economy but had grown to almost one-half only eight years later (Sherman, 1969). From the perspective of planners in Washington in the late 1950s, the danger loomed that at current rates of growth, the Soviet economy would overtake the US economy by 1982. At that point, the entire foundation of the US population’s belief in the legitimacy of free enterprise—that it produced higher living standards than public ownership and planning—would crumble. Something had to be done.

By 1975, the CIA estimated that the Soviet economy was 60 percent as large as the US economy (Kotz and Weir, 1997). However, Soviet economic growth was starting to slow. According to figures provided by Allen (2003), Soviet GDP per capita grew at an annual rate of 3.4 percent from 1928 to 1970, but at less than half that rate, 1.3 percent, from 1970 to 1989. Had the United States, alarmed at being beaten into space, and agitated by what seemed to be the very real prospect of being overtaken economically by the USSR, set out to sabotage Soviet economic progress?

The Cold War was never going to be kind to Soviet growth prospects. Soviet leaders recognized that a planned, publicly owned economy was an anathema to the captains of industry and titans of finance who use their wealth and connections to dominate policy in capitalist countries. The USSR had been invaded multiple times, and on two occasions by aggressive capitalist powers with the objective of wiping the Soviet system off the map. In order to deter future aggressions, it was necessary to keep pace militarily. Therefore, the Soviet Union struggled as best as it could to achieve a rough military parity to maintain a peaceful coexistence with its capitalist neighbours (Szymanski, 1979).

However, the smaller size of the Soviet economy relative to that of its ideological competitors created problems. The necessity of maintaining a rough military parity would mean spending a far higher percentage of GDP on the military compared to what the United States and other NATO countries spent on their armed forces. Resources that could otherwise have been deployed to industrial expansion to help the country catch up economically had instead to be channelled into self-defence (Murphy, 2000). From the 1950s through the 1970s, the Soviets spent 12 to 14 percent of their GDP on the military (Szymanski, 1984; Allen, 2003), a figure that would grow even higher later, when the Reagan administration hiked US military spending, anticipating a Soviet effort to keep up that would harm the USSR’s economy.

Another constraint imposed on the Soviet economy by the need to deter military aggression was the monopolization of R&D resources by the military. Keeping pace militarily involved an unceasing battle to catch up to US military innovations. When the United States exploded the first atom bomb in 1945, the Soviet Union raced to match the United States’ grim scientific feat, which it did four years later. The US introduction of the hydrogen bomb in 1952 was quickly followed by the Soviets exploding their own hydrogen bomb a year later. A US first in submarine-launched nuclear missiles was matched by the USSR a few years after. No major weapon was developed by the USSR first, with a single exception—the ICBM. Unlike the United States, the USSR had no military bases ringing its ideological rival, and therefore needed a way of delivering nuclear warheads over long distances. However, the aim was self-defence, and that the Soviet Union was usually in catch-up mode on weapons systems demonstrated that the United States was spurring the Cold War forward, not the USSR. For the Soviets, the Cold War was economic poison. For the Americans, the Cold War was a way to ruin the Soviet economy.

Because self-defence was a priority, the USSR’s best scientists and engineers were channelled into the military sector (Sherman, 1969). Soviet consumer goods were often said to have been of low quality, but no one ever said the same about Soviet military equipment. The reason why is clear: the military got first dibs on the best minds and best equipment and was never short of funding. There is a subsidiary point: high-quality Soviet arms were produced by a system of public ownership and planning, despite the myth that such a system is incapable of producing high-quality goods (Kotz, 2008). The necessity of channelling the bulk of, and best, R&D resources to the military meant that other sectors suffered, and GDP growth was impeded. For example, the Soviets floundered in their efforts to increase petroleum production because the metals, machinery, scientists and engineers needed to boost oil output were detailed to the military sector (Allen, 2003). Half of the machine tools produced and at least half of the R&D expenditures were going to the defence industry (Schweizer, 1994).

Another reason for the post-1975 slowdown in the Soviet economy was that the USSR had become ensnared in a Ricardian trap (Allen, 2003). The Soviet Union had an abundant supply of all the raw materials an industrial economy needed, and at first, they were easy to reach and therefore could be obtained at low cost. For example, in the early years of the USSR’s industrialization, open pit mines were dug near industrial centres. Minerals were close to the surface and could be transported over short distances to nearby factories. Therefore, production and transportation costs were minimal. However, over time, the minerals that were close to the surface were scooped out and pits became deeper and narrower. At deeper depths, the quantity of minerals that could be extracted diminished and the costs of reaching them increased. Eventually, the mines were exhausted, and new mines had to be opened, but at greater distances from industrial centres, which meant higher costs to transport raw materials to factories. The Soviet petroleum industry was equally caught in a Ricardian trap. In the early 1970s, the USSR was spending $4.6 billion per year to maintain its oil industry. As oil became more difficult to reach, the Soviets had to drill deeper and through harder rocks. Costs increased, reaching $6.0 billion by the end of the decade. By the early 1980s, costs had climbed to $9.0 billion a year (Schweizer, 1994). The Soviets could have escaped the Ricardian trap by shopping around for less expensive imports. However, that would have left them vulnerable to supply disruptions. The United States and its allies—who would always be hostile to the USSR, except when expediency dictated temporary alliances or easing of tension—could interdict raw materials heading to the USSR to bring the Soviet economy to its knees or extort concessions. In other words, given the very high likelihood that the United States would exploit opportunities to place the Soviet Union at a disadvantage, shopping around for cheap imports, rather than implementing a policy of resource self-sufficiency, was not a realistic option.

Soviet achievements in space: The first satellite, first animal in orbit, first human in orbit, first woman in orbit, first spacewalk, first moon impact, first image of the far side of the moon, first unmanned lunar soft landing, first space rover, first space station and first interplanetary probe.

Another reason the Soviet economy slowed was that the costs to the USSR to support its allies began to mount to unsustainable levels. One way to bolster self-defence is to find friends who share the same enemy, and the Soviet Union set out to expand its alliance of friends by providing economic and military assistance to countries and movements hostile to the forces of reaction. In doing so, it became the banker for national liberation movements, Eastern European socialist countries, and various Third World countries seeking to escape and remain free from domination by powerful capitalist states. By 1981, the Soviet Union and its Eastern European allies had 96,000 economic advisers in 75 countries and 16,000 military advisers in 34 countries, together with a contingent of 39,000 Cuban troops in Africa, an army for which Moscow was ultimately footing the bill. At the same time, the Soviets were picking up the tab for 72,000 Third World students enrolled in Soviet and East European universities (Miliband, 1989). By 1980, Moscow was spending $44 billion a year on its allies (Keeran and Kenny, 2004). It gave $4.5 billion in aid to Warsaw from August 1980 to August 1981 alone to help contain the US-supported Solidarity movement (Schweizer, 1994). Meanwhile, the war in Afghanistan was draining the Soviet treasury to the tune of $3 to $4 billion per year. In other words, the costs of sustaining allies had grown enormous, raw material costs were mounting, the best scientists, engineers and machine tools were being monopolized by the military, and military expenditures were consuming a punishingly large percentage of national income.

A large part of the predicament the Soviets found themselves in was due to a decision the Reagan administration had taken to try to cripple the Soviet economy. In October 1983, US president Ronald Reagan unveiled what would become known as the Reagan Doctrine. “The goal of the free world must no longer be stated in the negative, that is, resistance to Soviet expansionism,” announced the US president. Instead, the “goal of the free world must instead be stated in the affirmative. We must go on the offensive with a forward strategy of freedom” (Roberts, 1999). This was a declaration of the end of détente. The gloves were off.

More formally, the Reagan Doctrine was spelled out in a series of national security decision directives, or NSDDs. NSDD-66 announced that it would be US policy to disrupt the Soviet economy, while NSDD-75 committed the United States to trying to drive up costs in the Soviet economy in order to plunge the USSR into a crisis. The Soviet economy was to be squeezed, and one of the ways was to induce Moscow to increase its defence budget (Schweizer, 1994). A hi-tech arms race would be the key. It would not only force Moscow to divert more resources to the military, but would channel even more of the USSR’s scientists, engineers, machine tools, and budget into military R&D, reducing productive investments and hobbling the civilian economy even more than the Cold War already had. The aim was to force the USSR “to expend precious lifeblood to run a race against a more athletic foe” (Schweizer, 1994), a foe which had a larger economy and more resources to last the race because it had started at a higher level of development and was plundering various countries around the world of their riches.

The Reagan Doctrine was spelled out in a series of national security decision directives, or NSDDs. NSDD-66 announced that it would be US policy to disrupt the Soviet economy, while NSDD-75 committed the United States to trying to drive up costs in the Soviet economy in order to plunge the USSR into a crisis.

Over the first six years of his presidency, Reagan more than doubled US military expenditures, buying 3,000 warplanes, 3,700 strategic missiles, and close to 10,000 tanks (Schweizer, 1994). To keep up, Soviet military spending, previously at 12 to 14 percent of GDP, started to climb. Already twice as large as the United States’ as a percentage of national income (Silber, 1994) the defence budget grew larger still. Military expenditures increased by 45 percent in five years, considerably outpacing growth in the Soviet economy. By 1990, the Soviets were spending more than 20 percent of the country’s GDP on defence (Englund, 2011). At the same time, Moscow increased its military R&D spending nearly two-fold. In the spring of 1984, Soviet leader Konstantin Chernenko announced that ‘the complex international situation has forced us to divert a great deal of resources to strengthening the security of our country” (Schweizer, 1994).

Meanwhile, the Reagan administration had taken a page out of Che Guevara’s book. The Argentine revolutionary had called for not one, not two, but three Vietnams, to drain the US treasury. Turning Che’s doctrine against communism, CIA Director Bill Casey called for not one, not two, but a half a dozen Afghanistans. To bog down the Soviets in “their own Vietnam,” the Afghan mujahedeen were showered with money and arms. In Poland, financial, intelligence, and logistical support was poured into the Solidarity movement, forcing Moscow to increase support to the Polish government (Schweizer, 1994).

The Soviet media complained that the United States wanted to impose “an even more ruinous arms race,” adding that Washington hoped the Soviet economy would be exhausted (Izvestiya, 1986). Soviet foreign secretary Andrei Gromyko complained that the United States’ military build-up was aimed at exhausting the USSR’s material resources and forcing Moscow to surrender. Gorbachev echoed Gromyko, telling Soviet citizens that,

The US wants to exhaust the Soviet Union economically through a race in the most up-to-date and expensive space weapons. It wants to create various kinds of difficulties for the Soviet leadership, to wreck its plans, including in the social sphere, in the sphere of improving the standard of living of our people, thus arousing dissatisfaction among the people with their leadership (Schweizer, 1994).

Capitulation

By the mid-1980s, it was clear in both Washington and Moscow that the Soviet Union was in trouble. It was not that the system of public ownership and planning was not working. On the contrary, recognizing the advantages of the Soviet system, the United States itself had emulated it to stimulate innovation in its own economy. Moreover, the Soviet economy was still reliably expanding, as it had done every year in peacetime since Stalin had brought it under public control in 1928. However, defending the country in the face of a stepped up Cold War was threatening to choke off economic growth altogether. It was clear that Moscow’s prospects for keeping pace with the United States militarily, while at the same time propping up allies under attack by US-fuelled anti-communist insurgencies and overthrow movements, were far from sanguine. The United States had manoeuvred the Soviet Union into a trap. If Moscow continued to try to match the United States militarily, it would eventually bankrupt itself, in which case its ability to deter US aggression would be lost. If it did not try to keep pace, it could no longer deter US aggression. No matter which way Moscow turned, the outcome would be the same. The only difference was how long it would take the inevitable to play out.

Gorbachev chose to meet the inevitable sooner rather than later. His foreign affairs adviser, Anatoly Chernayaev, recalls that it was “an imperative for Gorbachev that we had to put an end to the Cold War, that we had to reduce our military budget significantly, that we had to limit our military industrial complex in some way” (Schweizer, 1994). The necessity of reining in the defence budget was echoed by another Gorbachev adviser, Aleksandr Yokovlev, who would later recall that “It was clear that our military spending was enormous and we had to reduce it” (Blum, 1995). Gorbachev therefore withdrew support from allies and pledged cooperation with the United States. This was a surrender. The capitulation was hidden behind honeyed phrases about promoting international cooperation and fostering universal human values, but the rhetoric did not hide the fact that Gorbachev was throwing in the towel. He described the surrender as a victory for humanity, declaring that he had averted “the threat of nuclear war,” ended the “nuclear arms race,” reduced “conventional armed forces,” settled “numerous regional conflicts involving the Soviet Union and the United States,” and replaced “the division of the European continent into hostile camps with … a common European home” (Gorbachev, 2011). In reducing the threat of a global nuclear conflagration, Gorbachev had indeed achieved a victory for humanity. However, the victory was brought about by caving in to the United States, which was now free to run roughshod over countries that were too weak to refuse US demands that they yield to US political, military and economic domination.

Gorbachev is still widely admired in the West, but his popularity stops at the Russian border. A March 2011 poll found that only one in 20 Russians admire the Soviet Union’s last leader, and that “perestroika,” the name for Gorbachev’s move toward a market economy, “has almost purely negative connotations”

On domestic matters, Gorbachev—who identified himself with the virtually social democratic position of the Italian Communist Party (Hobsbawm, 1994)—tried to turn the Soviet Union into a Western-style social democracy (Roberts, 1999). He cited the need to reverse the slowdown in the Soviet economy as his rationale for the transition (Gorbachev, 1988). Economic growth had certainly slowed, and there was indeed a danger that continued slow growth would threaten the country’s position vis-à-vis its capitalist rivals. However, Gorbachev’s solution amounted to, “If you can’t beat ‘em, join ‘em.” The planning apparatus, which had unfailingly charted a course for unremitting growth during peacetime, was dismantled, in order to move the economy toward regulation by market forces. Rather than boosting economic growth, as Gorbachev hoped, the abandonment of planning did the very opposite. The economy tumbled headlong into an abyss, from which the USSR’s successor countries would not emerge for years. As one wag put it, “Stalin found the Soviet Union a wreck and left it a superpower; Gorbachev found it a superpower and left it a wreck.” Gorbachev is still widely admired in the West, but his popularity stops at the Russian border. A March 2011 poll found that only one in 20 Russians admire the Soviet Union’s last leader, and that “perestroika,” the name for Gorbachev’s move toward a market economy, “has almost purely negative connotations” (Applebaum, 2011).

The superior system

With few exceptions, what passes for serious discussion of the USSR is shot through with prejudice, distortion, and misconception. Locked in battle with the Soviet Union for decades, Washington deliberately fostered misunderstandings of its ideological foe. The aim was to make the USSR appear bleak, brutal, repressive, economically sluggish and inefficient—not the kind of place anyone of sound mind would want to emulate or live in. Today, scholars, journalists, politicians, state officials, and even some communists repeat old Cold War propaganda. The Soviet economy, in their view, never worked particularly well. However, the truth of the matter is that it worked very well. It grew faster over the period it was publicly owned and planned than did the supposedly dynamic US economy, to say nothing of the economies of countries that were as undeveloped as the USSR was in 1928, when the Soviet economy was brought under public control. The Soviet economy was innovative enough to allow the USSR to beat the United States into space, despite the United States’ greater resources, an event that inspired the Americans to mimic the Soviet Union’s public support for R&D. Moreover, the Soviet system of public ownership and planning efficiently employed all its capital and human resources, rather than maintaining armies of unemployed workers and inefficiently running below capacity, as capitalist economies regularly do. Every year, from 1928 to 1989, except during the war years, the Soviet economy reliably expanded, providing jobs, shelter, and a wide array of low- and no-cost public services to all, while capitalist economies regularly sank into recession and had to continually struggle out of them on the wreckage of human lives.

The US National Intelligence Council warns ominously that a crisis-prone world economy could produce chaos and distress on an even greater scale than the last crisis (Shanker, 2012). Offering a “grim prognosis” on the world economy, the UN warns of “a new global recession that mires many countries in a cycle of austerity and unemployment for years” (Gladstone, 2012). Yet at the same time, we are told that the Soviet economy never worked, and that capitalism, with its regular crises, and failure to provide employment, food, clothing and shelter to all, is both the only game in town and the superior system. Clearly, it is neither superior—on the contrary, it is clearly inferior—nor it is the only choice. Not only can we do better, we have done better. It is time to tear down the wall of politically engineered misconceptions about public ownership and planning. For too long, the wall has kept us from seeing a viable alternative model to capitalism whose track record of unequalled success points to a realistic and possible future for the bottom 99 percent—a future free from unemployment, recessions, extremes of wealth and poverty, and where essential goods and services are available at no cost to all.

Allen, Robert C (2003). Farm to Factory: A Reinterpretation of the Soviet Industrial Revolution, Princeton University Press, 2003.

Applebaum, Binyamin (2012). “A shrinking military budget may take neighbours with it”, The New York Times, January 6, 2012.

Keeran, Roger and Kenny, Thomas (2004). Socialism Betrayed: Behind the Collapse of the Soviet Union, International Publishers, New York, 2004.

Kotz, David M (2000). “Socialism and Capitalism: Lessons from the Demise of State Socialism in the Soviet Union and China,” in Socialism and Radical Political Economy: Essays in Honor of Howard Sherman, edited by Robert Pollin, Cheltenham and Northampton: Edward Elgar, 2000, 300-317.

Kotz, David M (2003). “Socialism and Global Neoliberal Capitalism”, Paper written for the International Conference: The Works of Karl Marx and Challenges for the XXI Century, Havana, Cuba, May 5-8, 2003.

Kotz, David M (2008). “What Economic Structure for Socialism?” Paper written for the Fourth International Conference “Karl Marx and the Challenges of the XXI Century, Havana, May 5-8, 2008.

Kotz, David M (2011). “The Demise of the Soviet Union and the International Socialist Movement Today”. Paper written for the International Symposium on the 20th Anniversary of the Former Soviet Union and its Impact, Beijing, April 23, 2011.

Kotz, David with Fred Weir (1997). Revolution From Above: The Demise of the Soviet System, Routledge, 1997.

Leffler, Melvyn P (1994). The Specter of Communism: The United States and the Origins of the Cold War, 1917-1953, Hill and Wang, 1994.

Lerouge, Herwig (2010). “How the October Revolution and the Soviet Union contributed to the labour movement in Western Europe, and more particularly in Belgium”, Belgium Works Party, May 05, 2010.

42 Responses

Obviously, much of what is said about the S.U. in the U.S. is lies and propaganda. However, the ruling class of the S.U. did make some important strategic mistakes. For example, it was unnecessary to maintain military parity with the West. It is necessary only to be clearly capable of hurting an attacker to a greater extent, to cost the attacker more, than the attacker is willing to give up to carry out the attack. The degree of centralization and consequent centralized micromanagement in the S.U. was also apparently a serious error (one often observed in the West, although usually on a corporate rather than a whole-state level). I suspect both of these problems emanated from the peculiar style of politics which seems to be traditional in Russia, as witness the adventures of the present Tsar. The clouds part briefly from time to time, but then they close in again.

This article is a model for the case Communists should be making every day, all over the world: that we already have overwhelming, concrete evidence for the superiority of socialism over capitalism. We do not need to rely on speculation of any sort.

The reality of daily life for millions of Soviet citizens during the 20th century provides this evidence. Socialism works. And what has happened since 1989 in that region proves the associated point beyond all doubt; that capitalism is an unmitigated catastrophe for all but the ruling class.

Although it is true that many “communists” in the West have failed to make this point, the total bankruptcy and cowardice of Trotskyites and other anti-communists on the Left cannot divert from this basic point. And besides, their objective alliance with imperialism cost them their credibility long ago.

As far as the mistakes of the S.U., the key military error its leaders made was to not call Reagan’s bluff and waste so much effort and money and resources on militarizing. The S.U. should have looked at the weaknesses in the US defense system and developed top notch weaponry capable of striking these weaknesses. Indeed the Russians did this in the 1990s with missile technology but it was too late at that point.
The S.U. should have kept its missile/rocket toechnology and nuclear deterrent strong and modern and kept the conventional forces in a normal state, and dedicated their professionals and engineers to improving civilian technologies which could then be exported to other nations. This would have improved the Soviet economy and it would eventually be on par with the west, if not better.
Another tactic the west used was to put all kinds of sanctions, embargoes and roadblocks for socialist economies so that they had a hard time selling their products and services overseas. This eventually made these economies hard-strapped for cash. So to make things even worse, the west stepped in to offer these countries billions od dollars of loans at insanely high interest rates. This buried these countries economies even more. Socialism NEVER got a fair chance to prove itself.

I believe this to be somewhat of a false dichotomy, although the description of capitalism is indeed true, since under conditions of overcapacity (where consumers, due to the structural maladies of the global labor market that reduces the compensation of workers, do not have the earning power to purchase finished goods) stores would indeed be “full of consumer items”. There is no inherent “glitz” to capitalism: it is just a quixotic fantasy for the workers that is only tangible to the one percent. Even when socialist economies had no “glitz”, it is almost certain that one could still live out their lives in peace and dignity in the egalitarian environment there, regardless of their income, education, socioeconomic background, and occupational prestige.

Moreover, I believe that socialism would eventually, if we assume that it did not suffer through the attrition of an arms race so it could devote resources to consumer research and development, converge economically with European (capitalist) social democracies and its citizens too would enjoy the fruit of the “information age” — instantaneous high throughput communication through the medium of the internet, and computational devises with high processing power and information storage capacity with useful software. Also, in this scenario, this reasonable degree of material prosperity would be achieved in a social milieu of economic egalitarianism without a deceptive veil that merely conceals the underlying interclass conflict between the social and economic elites and the workers. This veil involved a syncretic mixture of free enterprise and government run programs to mitigate the detrimental aspects of the former and propaganda (from the media and education) and propaganda (from the media and education) misinforming the masses about the nature of socialist states and often exploiting jingoistic sentiments and intraclass animus (for example, racial hostility within the US). This “comprise” between the economic elites and labors was tenuous and the compact was readily revocable when the “socialist menace” was no longer deem a significant geopolitical threat (as Gowans pointed out here and in other articles). The “failure” of the Soviet Union left me despondent, since it ostensibly shows the impossibility of reconciling social equality with economic prosperity in the long term. During the dot-com frenzy, capitalism was synonymous with dynamic, technological progress (while social was associated with a doddering, sclerotic political economy). Regrettably, even contemporary progressives believe that “socialism” is unworkable by itself: their ideal is a bridled, regulated version of capitalism with social welfare programs.

——
Although I lost most of my fervor for Marxism-Leninism, I am still grateful to my two Marxist-Leninist catechists: Henry CK Liu and Stephen Gowans. Both possess an unparalleled level of erudition due to the depth and breadth of knowledge of history, economics, political philosophy, and foreign policy. They have left an indelible mark on my intellect.

Thank you Stephen Gowans, thank you. Your writing is a wonderful use of your verbal ability and historical and economic knowledge to convey a robust, insightful thesis about the unrealized potential of socialism and the pernicious nature of capitalism against the current reactionary deception and propaganda. You are inspirational.

I am still intellectually loyal to Marxism-Leninism and can readily defend the tenets of the ideology, although it does create some ideological conflict within me with my other (spiritual) commitments since I am now (currently unconfirmed Roman Catholic). (I still have a secular admiration of Joseph Stalin though and I admitted this to a few religious confidants.) I am de facto apolitical since I do not think a revolution in developed countries is feasible in the short or medium term, and I do not think my individual participation (or even a concerted collective movement) would accomplish anything of significance within the confines of bourgeois democracy and in the background of neoliberal globalization. Often, around my peers of young adult Catholics, I facetiously disregarded voting in the previous election. I felt insulted (although it was ignorant and unintended) when someone there called me a “Democrat” after I provided a succinct summary of my political views. While the possession of accurate information or proper political consciousness itself would not suffice to affect reality or the correct the injustices and misdistribution of resources of contemporary capitalism, there is nevertheless valuable in being personally emancipated, through education, from the establishment’s pervasive delusions, lies, myths, and propaganda used to instill in the populace a passive acceptance of the ideals of the capitalism.

Thanks Stephen. This is really terrific.
It would probably be quite interesting to read an exhaustive list of criminal and/or questionable activities which were illegal in classical socialist economies, but legalised in capitalist economies.

Toward the end of Putin’s annual Presidential Address to the Federal Assembly, circa December 12, he claimed that Russia has 55% of the world’s arable land. “Arable” has several conditional definitions but If his claim is plausible then it would help to explain why the water carriers for the West’s 1% display an unhealthy interest in regime change in Russia, every so often.

One suspects that the miniscule and unrepresentative liar’s club, posing as the “international community” on the world stage, has foolishly underestimated Russia’s determination to prevent the perpetrators of the Arc of Instability from gaining a toe-hold in Syria.

One wonders if the Americans still think it was a good idea to scare the Russians into perfecting anti-ship and anti-aircraft missiles while the Americans were building thousands of warships and military aircraft?

We don’t know much about the potential of the socialist political economy — what would it have achieved in the absence of the meddlesome, bellicose incursions of an imperialist superpower — but we do know, if we objectively considered the economic constraints of socialist nations and diligently analyze the evidence, that socialist nations generally allowed their citizens to live in peace and dignity.

It is worth repeating those words: peace and dignity. Ask yourself if the impoverished people in Georgia, United States, a state with a pervasive culture of reactionary racialist conservatism, are able to live lives of “peace and dignity” when compared to the life of an average citizen in the DDR?

The Fall of the Eastern Bloc, particularly East Germany, should be lamented as a calamitous failure of a powerful engine for genuine, socioeconomic progress, not celebrated by liberal progressives as a (false)
liberation from the”repressive”, “stifling” political and economic institutions of socialism.

If there was ever a vain hope, it is the hope that the servitors of ‘that coldest of all cold monsters’, the state, would act in a humane or sympathetic manner towards the objects of their work (with a few exceptions).

Modern Welfare was introduced by people like Bismarck in the late 19th century, and spread to the U.S. in the 20th, in order to eliminate or mitigate certain undesirable phenomena, like people dying in the streets, or engaging in crime or beggary in order to live. The communities of the desperately poor were also seen as a breeding-ground for radical politics, disease, social disorder, and vice. In any case, most of the better-off people found them unpleasant to look upon. They could, of course, be put in concentration camps or killed, but the experiments of the Third Reich in this direction show that that sort of policy can get out of hand. So
there have been many good reasons for the ruling class and its supporters to provide Welfare.

If it is true that the state of Georgia is terminating support for the destitute, then the conditions Welfare was supposed to suppress can be expected to reappear. If they do not, it seems that we do not have a good understanding of the economics of the situation.

If they are reappearing, then we have a pre-revolutionary situation, which is almost certain to have interesting if rather cruel consequences.

While this article is generally very good, and the spirit of it certainly spot-on, i think Stephen Gowans greatly overstates the case that the reason the USSR collapsed was primarily because of i) military overspending and ii) the “Ricardian trap” of resource extraction tending to become more expensive over time. Neither offers a satisfactory explanation of why the Soviet Union collapsed at all. North Korea is forced to spend a stupendous proportion of its GDP on the military, and is a tiny country with a tiny fraction of resources at its disposal compared to what the USSR had (fully one sixth of the world’s entire land area!), and moreover is significantly more isolated on the international stage today than the USSR was by the 1980s. Yet North Korea has not collapsed, and neither does it look at all likely to do so anytime soon.

I find it all the more surprising that Gowans makes these two factors the centrepiece of his explanation of why the Soviet Union collapsed, as i see amongst the references for this article the superb 2004 book by Roger Keeran and Thomas Kenny, Socialism Betrayed: Behind the Collapse of the Soviet Union. As this book explains in great detail, the principal reason for the Soviet collapse lay in poor leadership by Gorbachev after 1985. But, as the book goes on to explain, neither Gorbachev nor his misguided policies arose out of nowhere; rather, they had deep roots in the history of the Communist Party of the Soviet Union itself.

Participating in the Bolshevik Revolution had been a number of different political tendencies, each with their own ideas about how socialism could best be achieved. The years after the Revolution had come to be characterised by a clash between two principal tendencies within the CPSU: firstly, the Stalinist tendency which occupied the Party leadership and – recognising the danger posed by imperialist aggression against the USSR if the country did not industrialise rapidly – advocated moving against the richer peasantry and enforcing collectivisation on them; and secondly, the Bukharinite tendency which advocated a class-conciliatory approach to the richer peasantry by continuing to allow them to keep their profits as had been the case under the Party’s “New Economic Policy” until 1928. Thus, within the Party itself, there effectively came to be two key opposing tendencies: one with roots in the industrial proletariat of the towns and more pro-socialist; the other with roots in the richer peasantry of the countryside and more pro-market. Under Stalin’s inspired leadership, the industrial tendency was in the ascendant, and it was this that enabled the building of socialism, the victory of the USSR over Nazi fascism, and the socialist state’s phenomenal rise to superpower status by the time of Stalin’s death in 1953. Nikita Khrushchev’s loyalties, however, were with the Party’s agrarian wing (although to have openly advocated this during Stalin’s lifetime would certainly have meant career suicide at the very least), and it was these interests that motivated Khrushchev’s denunciation of Stalin in 1956, his liberalisation of political life, his tentative attempts at pro-capitalist economic reform, and his attempts to cosy-up to the West. All of these strategies ended in failure: liberalisation led to corruption, cynicism, cronyism, and careerism within the Party; pro-capitalist reforms led to lower productivity in both industry and agriculture; and cosying up to the West was – predictably – met with a slap in the face, as represented by the U2 incident of 1960; moreover, the People’s Republic of China broke off its alliance with the Soviet Union in the same year, disgusted at Khrushchev’s persistent attempts to curry favour with the imperialist bloc.

Thus Khrushchev was unceremoniously removed from power in 1964, and the pendulum of Party policy moved back somewhat in the direction of its proletarian wing. Yet a lot of damage had already been done: in the main, Khrushchev’s liberalisation of civil society had enabled a parasitic black market to arise on the margins of society, as well as a dissident “liberal” intellectual culture that defended the “right” of individuals to engage in “free enterprise” (i.e. the freedom to exploit others) and “free speech” (i.e. the freedom to publicly attack the Party and socialism, and glorify the “free, democratic West”). Thus the economic and ideological basis for a resurgence of pro-market ideas, both within and without the Party, had been well and truly strengthened by the Khrushchev years. As growth slowed during the seventies (though this was far from the real slump that rocked the Western capitalist economies during these years), both Soviet and Western critics of Soviet socialism were able to construct an artificial narrative of “stagnation” that, rather than being a result of the pernicious moves towards capitalism in recent years, was instead painted as being a result of the “inherent inefficiency of central planning” and therefore as an argument for even further moves in a pro-market direction. This was the environment in which Gorbachev (tellingly having previously served as Minister for Agriculture) acceded to the leadership in 1985, Margaret Thatcher having already opined of him the previous year as “someone we can do business with”. In his politically immature, Khrushchevite, social-democratic, and thoroughly un-Marxist way, Gorbachev believed he could transform the “repressive” USSR into a “normal” (ha!) social-democratic country like Sweden; this he set out to do, bit by bit, by setting in motion a number of strategies – though, in the early years, mindful of Khrushchev’s dismissal in 1964, he and his allies in the Party were always careful to cloak these strategies in apparently Marxist-Leninist rhetoric about “modernising” and “improving” socialism. In essence, however, the strategies were:

i) “Glasnost”, i.e. the “liberalisation” of the media – which amounted to handing the top positions in the Soviet media over to liberal allies of Gorbachev, who were then free to publicly denounce the Party and socialism, and advocate more and more moves to emulate the “democratic” West; in 1988 Gorbachev even announced an end to the jamming of Western propaganda broadcasts into the Soviet Union, meaning the West were now free to – amongst other things – stoke the flames of nationalist discontent in the outlying republics of the USSR, flames which had themselves been sparked off by another of Gorbachev’s policies…

ii) Dismissing leaders of the various republics – no matter how competent and popular – if they opposed his liberalisation policies, and replacing them with cronies – no matter how incompetent and corrupt – who supported his policies.

iii) Deliberately undermining the constitutional role of the Communist Party as the sole ruling authority and guarantor of working class power in the Soviet Union, and more and more openly moving towards a bourgeois parliamentary-type system in which the Communist Party would simply feature as one of a number of parties who could compete for political power in Western-style elections; in line with this, Gorbachev transferred the source of his own authority from a Party role to a State role – from General Secretary of the Communist Party of the Soviet Union, to President of the Soviet Union.

iv) “Perestroika”, i.e. the privatization of the Soviet Union’s entire centrally-planned economy: from 1987, at a stroke, profiteering was legalized in the Soviet Union; those who stood best to gain from it were the petty crooks of the black market who had of course been profiteering on the sly for years since Stalin’s death; overnight these men – men like Roman Abramovich and Boris Berezovsky – were turned into legitimate businessmen and entrepreneurs; and as state assets were sold off for a fraction of their true value by Gorbachev, these sharks were best positioned to swallow them up; their wealth and power increased exponentially, and by 1990 they were taking advantage of the newly liberalized political and media climate to procure the support of Western PR firms, to clamour loudly for even more “democracy”, and to found “democratic” political parties to compete against the hapless Communists in the new “free” elections.

And finally v): surrender to the West on the international stage. In the name of “peace” the USSR began to make greater and greater military and diplomatic concessions to the West, increasingly in return for nothing at all from the Western side. By 1989 Gorbachev was abandoning the Communist government in Afghanistan to its fate at the hands of a ruthless Western-backed Islamic fundamentalist insurgency, and giving the green light to counter-revolutionary “democratic” movements to overthrow ruling Communist parties in Eastern Europe.

By the end of the 1980s these five strategies had dovetailed into a situation where the Soviet Union was rapidly spiraling out of control: Communist Party rule had been overthrown throughout Eastern Europe, the Soviet economy was fragmenting as a result of Gorbachev’s pro-market reforms, the various non-Russian republics were clamouring for independence from the USSR, while Boris Yeltsin – backed by the new oligarchs and the Western media – was demagogically calling for Russia itself to break away. The abortive so-called “hardline coup” of August 1991 – in truth a half-hearted attempt by what was left of the Soviet government to reassert itself in the face of what it had stupidly allowed to become a formidable array of opposition forces – was of course far too little, far too late. Ultimately it served merely to offer Yeltsin the opportunity of administering the coup de grace: the Communist Party of the Soviet Union was outlawed, and the hapless Gorbachev was left as president of a country that now existed in name only. On 25th December 1991, even that hollow privilege was taken from him, as the Red Flag was finally lowered over the Kremlin, and the Soviet Union formally ceased to exist.

As can be seen from the above, the Soviet Union’s collapse was nothing to do with military overspending, or a “Ricardian trap” in terms of the increasing difficulties of resource extraction. Neither of these problems – problems though they were – would have posed any kind of serious problem to any sort of politically competent and ideologically committed Soviet leadership. The Soviet Union collapsed because of the rise to prominence in the CPSU of an objectively counter-revolutionary tendency – a tendency both Lenin and Stalin had worked tirelessly all of their political lives to eradicate. Having been decisively crushed by Stalin, it emerged once again under Khrushchev and finally crystalised under Gorbachev. Though Reagan and the American Right were keen to take the credit for defeating Soviet socialism, it should be clear from what has been said above that no amount of sabre-rattling, arms racing, and brinkmanship from the West could have posed anywhere near an existential threat to a genuinely Marxist-Leninist Soviet leadership. What caused the collapse of the Soviet Union was not defeat at the hands of the West; it was suicide at the hands of a half-incompetent, half-corrupt, but crucially social-democratic Soviet leadership. The key lesson to be learned from the Soviet collapse – a lesson that will not have been lost on the comrades in the ruling parties of Cuba and Korea – is surely therefore the absolutely vital importance of a thorough understanding of Marxist-Leninist theory amongst all Communist cadres, and the equally vital importance of an unrelenting struggle against all social-democratic opportunism throughout the working class movement.

I strongly recommend that all comrades read the Keeran and Kenny book, Socialism Betrayed: Behind the Collapse of the Soviet Union, for a deeper understanding of the historical processes behind the collapse of the once great and glorious USSR.

The usual practice is to attribute the Soviet Union’s demise to failure to adhere to a favored political practice. Anti-revisionists attribute the demise to Khrushchev’s revisionism; democratic socialists to the absence of Western-style parliamentary democracy; market socialists to the paucity of markets; planning advocates to the introduction of markets; capitalists to prohibitions against private productive property; and anarchists to hierarchy. Most explanations, then, reflect ulterior motives—making the case that one’s political point of view is proved by the Soviet Union’s demise. If only the Soviet Union had a multi-party electoral democracy, was decentralized at the point of production, adopted markets, crushed the informal market as Stalin would have, was more supportive of revolutionary movements, allowed more private ownership…. The USSR’s collapse has become a Rorschach ink blot into which proofs of multiple and conflicting political views are read. It seems that it proves everything.

Of course, it could be that the country’s political system and the practices of it leadership were not the ultimate causes of the collapse, and that the ceaseless efforts of the United States to ruin the country eventually produced circumstances which the leadership blundered in reacting to. It’s not so strange that the exponents of political axe-grinding-style explanations adopt a disease model of the Soviet Union’s death (it collapsed under the weight of internal system failures) rather than viewing the death as a murder or suicide. These too are possibilities, but are usually immediately ruled out of consideration for their uselessness in advancing political agendas.

It’s true that North Korea hasn’t collapsed despite the concerted efforts of the United States to topple its government, but the nature of North Korea’s revolution and society is very different from that of the USSR, as is the significance of North Korea on a world scale. The USSR’s size, power and inspiration to other countries made the task of its undermining more pressing for the United States compared to the task of undermining pipsqueak North Korea, which poses a threat to the United States of approximately zero, offers no significant support to revolutionary movements, and is an inspiration to few. Moreover, North Korea’s fierce commitment to independence and self-reliance makes it a tough nut to crack.

But let’s suppose that one day North Korea cries uncle, its economy suffocated by the stranglehold of Washington and it allies. To keep North Koreans from starving, the leadership in Pyongyang agrees to abandon public ownership and planning, the only way to get Washington to release its grip on the country’s economy. To what shall we attribute the demise of socialism in the DPRK? Ideological failure? Would Pyongyang’s recommitting itself to public ownership and planning resolve the existential challenge it faces, or only exacerbate it?

Explaining the cause for the collapse of the USSR is not just a philosophical exercise; like all sociological and historical phenomena, it is an event with material causes; it can and should be studied and explained scientifically. In my opinion, considering all the available evidence, the thesis put forward by Keeran and Kenny that i have outlined above is by far the most convincing i have seen.

Incidentally, supposing that your argument – that the USSR was inevitably overspent militarily to collapse by the Western arms race – is correct, does that not imply that we should all just give up on socialism? After all, if the US can just arms race any potential socialist state to collapse if it wants, what’s the point in trying to build such a state? Your argument seems to imply we might as well all just pack up and go home now.

Why, if it were military overspending that brought down the USSR, did it not collapse in 1941-5? That period saw a vastly greater share of Soviet GDP spent on the military than was the case in the 1980s, as the country was physically under attack by Nazi Germany!! Moreover, though i’ve not seen the figures (as i’m not sure there were any available at the time), i’d bet that the largest military spending by the Bolshevik government as a share of GDP occurred when Bolshevik Russia was under attack from the White armies and the Western interventionist armies during the Civil War period of 1918-21. At that time there was virtually no organised economic base to speak of, the Red Army had to be created from scratch, and food had to be requistioned ad hoc in order to feed the Red Army. 8 million died as a result of war and famine. The objective situation was vastly more desperate than at the time Gorbachev came to power in 1985. Yet at that time, under the leadership of Lenin, and in the face of overwhelming odds, the socialist state survived.

As i say, the facts show that the crucial determinant was the calibre of leadership.

It seems to me that the sort of centralized state constructed by Lenin and Stalin must inevitably be staffed by a hierarchy of people playing bourgeois roles, that bourgois roles lead to bourgeois culture, and that bourgeois culture leads to bourgeois politics, that is, liberalism and capitalism, which is what evolved in the Soviet Union. The fact that a liberal, social-democratic tendency emerged and re-emerged in spite of having been defeated and persecuted several times over suggests that something intrinsic to the existing social order was generating it. Maybe there was no alternative?

Under modern (post-Middle Ages) industrial conditions. For the bourgeoisie, near-anarchy above, near-feudalism below. The table of organization of a traditional corporation looks like the order of battle of a medieval army for a reason.

The defining characteristic of capitalism is wage labour, not hierarchy. And capitalist societies are not uniquely hierarchical. All class societies are hierarchical. But not all class societies are capitalist.

I disagree. I think all it demonstrates is that a) the quality of leadership in a socialist state is crucial (nothing really surprising here – the quality of leadership in any state is crucial), and b) poor leadership doesn’t have to be – and invariably isn’t in fact (that’s the problem!) – fully conscious of what it’s doing: there’s no doubt that both Khrushchev and Gorbachev subjectively did honestly intend to improve socialism through their policies, and thought that the best way of doing this was through liberalisation of political life and concessions to market mechanisms. The fact that figures like Khrushchev and Gorbachev could rise to prominence in the Party reflected the fact that the influence of petty-bourgeois social-democratic utopian socialism – with its roots in the peasantry – was still strong, despite the best efforts of Lenin and Stalin to carry out the Revolution and then the building of socialism according to the principles of scientific socialism of Marx, Engels, and Lenin himself. This fact in turn reflected the fact that at the time of the Revolution, Russia had been an overwhelmingly agrarian country; despite the vanguard of the Revolution being the consciously Marxist Bolshevik Party with its base in the urban industrial proletariat, it could never have carried through the Revolution without securing an alliance against capitalism and big landlordism with the much larger rural peasantry. Though it was later absolutely necessary for Stalin to turn on the richer peasantry in order to carry through industrialisation quickly enough to build up the country’s defences against the long-anticipated German attack, a lot of resentment of Stalin’s methods obviously remained amongst the Party’s agrarian wing, and this clearly found expression in Khrushchev’s “de-Stalinisation” programme. It’s not a question of “Why did these tendencies rise again after being defeated and persecuted several times over”: ideas aren’t immaterial essences that float around waiting to be selected or defeated; scientific socialism teaches us that ideas are reflections of material conditions. With successive generations of competent Marxist-Leninist leadership of the calibre provided by Stalin, the material basis for petty-bourgeois social-democratic ideas in what was now an industrialised country with a collectivised (and later what would have been a fully nationalised) agriculture would have disappeared. But the War had wiped out many of the Party’s best cadres, and it was unfortunate that Stalin’s successor turned out to be a proponent of a more social-democratic brand of socialism; had Khrushchev been honest about this when Stalin was alive, of course, he would never have been permitted to get within a sniff of succeeding him as General Secretary. With Khrushchev’s leadership, a further material basis for pro-market ideas was inadvertently created by the rise of the black market and careerism within the Party, as we have seen.

As the Keeran and Kenny book shows, the Party appeared to have hit upon a highly competent General Secretary with the accession of Yuri Andropov to the leadership in 1982. While Brezhnev had mostly just marked time as leader (which had allowed the corruption and careerism that had spawned during the Khrushchev years to grow and fester), Andropov characterised his leadership by a return to “Leninist standards” in internal Party discipline, and began an anti-corruption drive which even extended to members of Brezhnev’s family. Andropov’s conception of “Perestroika” was also much more limited than the all-out privatisation programme that it came to mean under Gorbachev; Andropov envisaged it instead as a targeted experimentation with incentive mechanisms at the margins of the economy, specifically within the wider framework of state central planning. Sadly, Andropov was not around for long enough to carry through his programme, as he of course died of renal failure in 1984; yet there is every reason to suppose that – as a leading CIA figure has since opined – had Andropov lived a further 20 years, we would still have a Soviet Union today.

I disagree. I think all it demonstrates is that a) the quality of leadership in a socialist state is crucial (nothing really surprising here – the quality of leadership in any state is crucial), and b) poor leadership doesn’t have to be – and invariably isn’t in fact (that’s the problem!) – fully conscious of what it’s doing: there’s no doubt that both Khrushchev and Gorbachev subjectively did honestly intend to improve socialism through their policies, and thought that the best way of doing this was through liberalisation of political life and concessions to market mechanisms. The fact that figures like Khrushchev and Gorbachev could rise to prominence in the Party reflected the fact that the influence of petty-bourgeois social-democratic utopian socialism – with its roots in the peasantry – was still strong, despite the best efforts of Lenin and Stalin to carry out the Revolution and then the building of socialism according to the principles of scientific socialism of Marx, Engels, and Lenin himself. This fact in turn reflected the fact that at the time of the Revolution, Russia had been an overwhelmingly agrarian country; despite the vanguard of the Revolution being the consciously Marxist Bolshevik Party with its base in the urban industrial proletariat, it could never have carried through the Revolution without securing an alliance against capitalism and big landlordism with the much larger rural peasantry. Though it was later absolutely necessary for Stalin to turn on the richer peasantry in order to carry through industrialisation quickly enough to build up the country’s defences against the long-anticipated German attack, a lot of resentment of Stalin’s methods obviously remained amongst the Party’s agrarian wing, and this clearly found expression in Khrushchev’s “de-Stalinisation” programme. It’s not a question of “Why did these tendencies rise again after being defeated and persecuted several times over”: ideas aren’t immaterial essences that float around waiting to be selected or defeated; scientific socialism teaches us that ideas are reflections of material conditions. With successive generations of competent Marxist-Leninist leadership of the calibre provided by Stalin, the material basis for petty-bourgeois social-democratic ideas in what was now an industrialised country with a collectivised (and later what would have been a fully nationalised) agriculture would have disappeared. But the War had wiped out many of the Party’s best cadres, and it was unfortunate that Stalin’s successor turned out to be a proponent of a more social-democratic brand of socialism; had Khrushchev been honest about this when Stalin was alive, of course, he would never have been permitted to get within a sniff of succeeding him as General Secretary. With Khrushchev’s leadership, a further material basis for pro-market ideas was inadvertently created by the rise of the black market and careerism within the Party, as we have seen.

As the Keeran and Kenny book shows, the Party appeared to have hit upon a highly competent General Secretary with the accession of Yuri Andropov to the leadership in 1982. While Brezhnev had mostly just marked time as leader (which had allowed the corruption and careerism that had spawned during the Khrushchev years to grow and fester), Andropov characterised his leadership by a return to “Leninist standards” in internal Party discipline, and began an anti-corruption drive which even extended to members of Brezhnev’s family. Andropov’s conception of “Perestroika” was also much more limited than the all-out privatisation programme that it came to mean under Gorbachev; Andropov envisaged it instead as a targeted experimentation with incentive mechanisms at the margins of the economy, specifically within the wider framework of state central planning. Sadly, Andropov was not around for long enough to carry through his programme, as he of course died of renal failure in 1984; yet there is every reason to suppose that – as a leading CIA figure has since opined – had Andropov lived a further 20 years, we would still have a Soviet Union today.

Let’s step back for a moment. The theme of this article—though you’d never know it from your comments—is that the publicly owned, planned economy of the Soviet Union worked. Even during the period of so-called stagnation, the economy unfailingly expanded year after year. But at a certain point (after 1975) growth slowed. Why?

Unless we want to think of the Soviet Union as an impenetrable island remote from the capitalist world that sought its destruction, then a very important part of the explanation must be found in the context in which the Soviet economy operated. What were the stresses that militated against growth? One stress was a Ricardian trap. Another was the military sector’s monopolization of the best machine tools and human talent. The punishingly large percentage of GDP that went to the military and to supporting socialist allies and national liberation movements were also factors.

All of these stresses were consequences of the continuation by the United States after WWII of Operation Barbarossa in a new form. That the Soviet economy held up under this onslaught is testament to the merits of public ownership and planning, for if the Soviet economy could unremittingly expand, providing full employment and a materially secure existence for all, despite the concerted efforts of the United States and its allies to undermine it, it likely would have performed at an even higher level in the absence of the United States’ enervating hostility.

To dismiss these stresses as non-factors is a mistake. It is, however, a mistake that communists, accustomed to arguing for a particular line within party debates, are all too likely to make. If you’ve invested significant time, energy and resources arguing, for example, that markets must be a necessary part of socialism, it’s very likely that you’ll attribute the slowing Soviet economy to a paucity of markets, ignoring other factors. Likewise, if you’ve argued that markets are an anathema, chances are your view of the slowing Soviet economy will stress growth in the informal market, while minimizing the role played by exogenous variables. Anarchists attribute the collapse of the USSR to hierarchy and centralization, democratic socialists to the absence of Western parliamentary democracy, and conservatives to the absence of private productive property. When making a point about how to organize a society, the accustomed practice is to minimize surrounding events and overemphasize policy.

The point of my article, you may have noticed, was not to discuss how the Soviet leadership should have reacted to slowing economic growth, but to offer explanations of why growth slowed, and to describe how the leadership reacted to slowing growth and an escalating US military threat. The choices that were made led to failure, as subsequent events demonstrated. But I didn’t set out to play historical what-ifs (what if Andropov hadn’t died or Molotov hadn’t lost his struggle against Khrushchev?) And nor did I set out to make the case that this or that strategy would have worked better. The point was to say: Here is a way of organizing an economy that works much better than capitalism, and that its apparent weakness as evidenced in slowing growth after 1975 was not reflective of an inherent flaw, but a consequence of a methodical plan conceived in and carried out by the United States to sabotage it.

As to the argument that says the USSR weathered the Nazi onslaught of WWII, therefore the stresses of military competition could not have played a role in the economy’s post-1975 slowdown, nor led to the capitulation of the leadership, we can dismiss as facile. First, the military stresses of WWII did disrupt the Soviet economy, pushing it off its path of unremitting growth. To suggest that military stresses in the post-war period couldn’t have retarded economic growth is clearly absurd. They did produce a negative effect in WWII and after the war as well, the only difference being that the negative effecst of the war years were profound and the negative effects of the post war years less profound. Second, the very fact that WWII happened, producing unimaginable destruction in the Soviet Union, changed everything. The war’s devastation had a profound effect on the Soviet leadership. Above all, it sought to avoid another major war, which threatened to be even more devastating that the one that preceded it. Hitler’s armies, as minatory and destructive as they were, were nothing against the kind of devastation the United States was capable of unleashing. That the Soviet Union survived Hitler offered no guarantee that it would survive even the threat of a far more devastating blow from the United States.

I see two problems with the theory that the West simply overpowered the Soviet Union as an explanation of its dissolution. The first is that it seems like an abandonment of analysis: if the West overpowered the S.U., why was it able to do so? Saying that the West acted in a hostile manner is not saying much; that’s how states do business. Secondly, I don’t think the Soviet Union was, actually, overpowered. It seems to me that it managed to survive as a state — it was not defeated in war or economically — and it provided its inhabitants with a reasonable standard of living, something many capitalist states have trouble doing. So some explanation is required. The information I can get is pretty scattered, obviously, but it looks to me like most of the managerial class of the Soviet state had become bourgeoisified. That is, they saw themselves as a sort of upper class, as the people who owned and operated things, because this in fact was their class position. Therefore, why not make it all explicit? Yeltsin and his kind, rather than Gorbachev, seem like the newest and latest Soviet men. It seems elementary that people who posses power and wealth through their class position will try to secure and extend that power and wealth as a class as well as individually.

Is not this, too, an abandonment of analysis though? I think you might be right in a sense that a critical mass of state managers did in fact ultimately become bourgeoisified in their outlook. But the point is how and why did this happen? Why was it the case by the 1980s whereas it had not been the case in the 30s, 40s, or 50s, for example? It’s no good saying it was “inevitable” – this just begs the question. If we start to look at the hows and the whys, we see it was due ultimately to the erosion of Marxist-Leninist ideology in Soviet socialism, and its gradual replacement by social democracy which, in the final analysis, is basically capitalism.

I can only speculate — I don’t have the money, time, or language skills to conduct extensive original research in Russia — but it seems to me that the difference in the Soviet Union between the period from 1917 until the mid-1960s. and the period thereafter until its dissolution, was the general concept of the leadership and people about their position in the world. In the earlier period, the S.U. was actually, or at least considered itself to be, at war with its environment and with domestic dissidents as well. And not just a war of pushing and shoving at the boundaries, but an existential war. Under such conditions, in almost any organized human community, much dissent is voluntarily suppressed or muted, and where dissenters do not volunteer, are generally vigorously suppressed with general public approval. After the 1960s, after the Cuban Missile Crisis and the defeat of the U.S. in Vietnam, a different view seems to have taken hold, one of provisional co-existence. (A popular word back in the day!) At this point the members of the managerial class could look around, notice that they were more powerful, better off, and had greater social repute than those outside their class, and start thinking about how their advantages could be institutionalized. They could also start communicating with one another and forming subcommunities of shared class interests. Doubtless some sort of overt capitalism looked better to a good many of them than the actual ownership and control — democratic control — of the means of production by the workers or the people in general, which might have been the alternative. I don’t see any other practical explanation of the events which terminated the Soviet state.

It seems to me that my hypothesis is rather Marx-ish, in that I’m postulating that people’s ideologies and world-views generally arise from their social situation, their roles in their communities, their material interests. In a sense we observe the development, on the ground, of the arguments between Lenin and the ‘Left Communists’ of nearly 100 years ago, about ‘state capitalism’. (http://www.marxists.org/archive/lenin/works/1918/may/09.htm and related material)

At the time of the revolution in 1917, capitalism was going through a major crisis that lasted from 1914-45. It was in this context that the revolution was made. After 1945 global capitalism, under the watch of the USA, experienced a great revival that only began to slow down in 1971 with stagflation but even then did not by any means come to a complete halt. Even today, after 2008, capitalism seems a lot like a grumpy old man who is at risk of liver failure but still is able to keep walking somehow.

This had a big influence on the leaders of the USSR. At the time of the revolution everyone involved was expecting that a coming failure of capitalism would make the superiority of socialism seem obvious. Although eastern Europe was in many ways better off after 1945 than large portions of the Third World, the fact was that most east Europeans graded their system by First World standards. One can argue that this was a mistake and that Poles should have more readily compared their state with Guatemala rather than France. But regardless, this was how people in eastern Europe thought.

The willingness of Alexander Solzhenitsyn to express support for a possible use of nuclear weapons in Indochina by the United States was a clear instance of First World identification on his part. All of the top Soviet leaders, even those who aided Vietnam in a strategic sense, also subscribed to such a First World identification. That created a motivation among the party brass towards something like perestroika.

It’s ironic, but if the crisis of 2007-8 had occurred a half century earlier in 1957-8 then it is very likely that the whole world would have drawn different lessons. Khrushchev’s de-Stalinization would not have led to a counter-revolution but more likely there would have been a great rejuvenation of faith in socialism. The fact that it took so long for a crisis in capitalism to arrive was pivotal in shaping Gorbachev, Yeltsin et al.

It also makes one wonder whether the “crisis of capitalism” of 2007-08 was more dire for capitalism compared to the stagflation of the 70s. Would the earlier 90s recession or the Dot-com collapse count as “crises” of capitalism. Perhaps some elements of the Austrian Business Cycle has some merits, even if it omits critical social and cultural details about the relevant economy; the United States utilized a lax monetary policy to inflate the equity and real estate markets, causing some sectors of the economy to flourish, but the frenzy of “malinvestment” could not be sustained because the return of the assets would not be enough to sustain asset price when credit expansion ceased. Such “malinvestment” could only be maintained during a vicious cycle that provides an increase in economic activity and an increase in security prices. In other words, in order for capitalism to address its inherent deficiencies in providing material prosperity and security to works absent of social welfare programs funded by high fiscal spending, the economy had to be stimulated through monetary means, and this excess source of funds would be allocated in sectors that have little prospect of ultimately remunerating one’s investment. Also, crisis could be forestalled by using the same lax monetary policies in order to inflate another bubble.

It did not seem that there was enough “malinvestment” for the US to experience a crisis of capitalism during the 80s. Nor did the working class’ economic position was severely compromised then (although the power of unions were being eroded) before the collapse of the USSR, since the influx of additional workers in the global labor force occurred when capital became more mobile and free trade deals rendered well-compensated domestic employment as too costly.
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I am not at all convinced it was entirely “revisionism” that brought the Soviet Union down, but I am convinced that had Stalin lived five more years, thing would have been better. Brezhnev did not address a culture of corruption within the USSR, but Yuri Andropov was a genuine Marxist-Leninist. Too bad Andropov had renal failure, perhaps he might have prevented the Soviet Union’s collapse if he had 10 more years. Other questions arise concern what would history have been if Henry Wallace instead of Dwight Eisenhower became president, or (even if it unlikely) Walter Mondale over Ronald Reagan?

I wished the Soviet Union survived, so that its citizens would be able to experience a “crisis of capitalism” and have an opportunity to express their gratitude (relative to the citizens of Greece) when it finally manifested. It is also lamentable that there needed to be some schadenfreude in order for many to appreciate the merits of a socialist economy and see that the apparent “shared prosperity” of capitalism is ultimately an illusion, but that is certainly better than having them experience it themselves and having the institutions of the Soviet state scuttled and dismantled.

I am still convinced that Marxism-Leninism is the most progressive force this world has ever known! Marxism-Leninism is not just an idea or philosophy.
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Gowans, I would suggest to enable comments again for your new posts, or perhaps there were too many troll comments and spam to moderate and delete. Your writing truly is a treasure, and it would be preferable if people can discuss the issues in good faith!

Does anyone have an opinion on this Joseph Ball essay? The gist is, after Stalin died, the USSR gave up on its system of subsidies for innovation, instead incorporating more market-based incentives. However, since they were still operating on a plan, this prevented the endogenous incentives that would have arisen under a full capitalist regime. So, from ~1955 onward, they had the weaknesses of both systems and the strengths of neither, as far as technological innovation was concerned. The impact of this was minor at first but in the ensuing decades became ever more onerous. Further, there is some speculation that some of the drive for market-based reforms was due to an underdeveloped analysis of imperialism, as the higher Western living standards may not have been associated with the systemic impoverishment of client states.

It seems on its face to be a sensible point, consonant with other things I’ve read. Has this idea been interrogated more thoroughly anywhere?

[…] What are we to make of the fact that the Soviet Union provided full employment, guaranteed pensions, paid maternity leave, limits on working hours, free healthcare and education (including higher education), subsidized vacations, inexpensive housing, low-cost childcare, and subsidized public transportation for the majority of its existence? (https://gowans.wordpress.com/2012/12/21/do-publicly-owned-planned-economies-work/) […]

Confidence in socialism: A look at the achievements and setbacks
This year marks twenty-five years since Mikhail Gorbachev resigned as the USSR’s last president and declared the birth of a “new world.”
But his promised society of universal human values and a peace dividend are nowhere in sight.
The wheels are falling off the global capitalist economy and imperialism is preparing wars that make Hitler look like an amateur.
If you’d like to grasp why the situation is so dire, why change is in the air and why change is needed, Stephen Gowans’ article (link appended) is a superb place to start reading.
Gowans is better at defending socialist economics than explaining revolutionary change, but he covers a lot of territory.
He sees socialism as “a future free from unemployment, recessions, extremes of wealth and poverty, and where essential goods and services are available at no cost to all.”

* * * *
Gowans has two main ideas in his article:
“It is time to tear down the wall of politically engineered misconceptions about public ownership and planning.”
And: “For the Soviets, the Cold War was economic poison. For the Americans, the Cold War was a way to ruin the Soviet economy.”
Gowans defends public ownership very well. But about the Cold War confrontation, whose main feature was an expensive and increasingly dangerous arms race, I have to question Gowans’ claim that the Soviet Union had to strive for military parity with the imperialist world.
We need to remember Frederick Engels’ advice that confronting capitalists is firstly a political struggle.

* * * *
Gowans’ article is excellent about socialism: its real achievements by and for workers, the need for peace, economic growth, social rights and so on.
It is a rare article that sums up the key realities of both capitalism and socialism.
Reading it is time well spent.
Gowans is a thousand times right about the incalculably tragic and dangerous outcome of the setbacks to socialism twenty five years ago.
I believe they are worse than he portrays them, militarily.
The setbacks are the direct cause of worsening conditions of workers globally.
Most importantly, they gave the capitalist world the liberty to prepare a new war among the world’s largest nations – another world war, this time with powerful nuclear weapons.
The NATO alliance’s military build-up against Russia and the U.S. pivot of nuclear-equipped naval forces against China are paving the road to Armageddon.
The latter point about a world war is not mentioned by Gowans. He correctly mentions imperialism’s growing predation of less developed and socialist countries since 1991 – Iraq, Yugoslavia, Libya, Syria and so on.
Gowans reminds us that on the day the Soviet Union ended (Dec. 25, 1991), Gorbachev said, “We live in a new world. The Cold War is finished. The arms race and the mad militarization of states, which deformed our economy, society and values, have been stopped. The threat of world war has been lifted.”
Gorbachev mutilated the basic socialist truth that war is an inherent feature of capitalism, especially in its highest, imperialist stage.
Gowans does not mention this, but the facts he relates imply it. He states Gorbachev surrendered to the U.S., but really he surrendered to capitalism and betrayed socialism.
Gorbachev also strayed from Marxism by asserting his declared new world would run on principles of ‘universal human values.’
Gowans mentions this point in passing, emphasizing the external danger to socialism as the reason for the setbacks. But the ideological rot under Gorbachev was more serious than Gowans’ description, as “honeyed phrases” and “rhetoric.”
They were words intended to overthrow working class power, overturn socialism and embrace capitalism.
A horde of ravenous crooks in the Soviet Union took full advantage of Gorbachev’s departures from Marxism.
It did not take long for Gorbachev’s mistaken and deceptive bubble of “universal values” to burst: The entire world became a luxury resort for the one percent and a nightmare for working people.
People like Gorbachev profited greatly by betraying socialism, but workers in Russia paid a tragic cost in living and health standards.
The capitalists in charge of Russia and the world economy never had the ability or any intention to keep Gorbachev’s promises.
Only a classless, communist society could achieve Gorbachev’s promise of universal values on a world scale.
Gorbachev popularized the old, unscientific theory of “convergence” of capitalism with socialism, a theory promoted by capitalist ideologists in the 1970s and exposed by Soviet Marxists at the time. The theory promoted the entirely false idea that capitalism is no longer dangerous, corrupt and exploitative.
Overly impressed by the gigantic movement for nuclear disarmament and a minor U.S.-Soviet disarmament treaty in 1987, most Marxists failed to combat Gorbachev’s convergence theory.

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An issue not addressed by Gowans is: Did the USSR make a strategic error (fall into a trap) of trying to achieve military parity with the USA, a goal declared in the 1970s?(1)
Gowans makes the important point that socialist countries had to industrialize quickly and massively to provide the material basis for a strong military defence against imperialist threats and invasions (1918-1921; 1941-1945).
In this deadly stand-off, the environment suffered along with workers who shouldered the cost of the arms build-ups.
Lenin pointed out that the early Soviet republic survived when it was vastly weaker militarily than the invading imperialist countries. It survived because it had the enormous sympathy and active solidarity of the world’s workers.
It is because of this that I question Gowans’ fatalistic conclusion that “If it did not try to keep pace (with military spending – DR), it could no longer deter US aggression. No matter which way Moscow turned, the outcome would be the same. The only difference was how long it would take the inevitable to play out.”
In a nuclear stand-off, setting a goal of military parity (to me) had the effect of downplaying the need for a political solution.
A less rigid strategy was for the USSR to follow Engels’ advice in 1891: “You shoot first, messieurs les bourgeois” and to let capitalism bankrupt itself. In other words, don’t play the game offered by capitalism.
Stalin himself may have followed Engels’ advice by seemingly ignoring Nazi Germany’s preparations to invade in 1941. His worst error may have been leaving too many soldiers close to the frontier and without proper communication.
Gowans correctly dates the official start of U.S. imperialism’s drive for military superiority to president Reagan’s 1983 declaration of an “offensive for freedom.” But detente was already stalled in Carter’s last years.
Led by the U.S., the imperialist world has been preparing for military superiority and confrontation since at least 1983.
This is why Russia, China and all fast-developing countries are under pressure to spend more money on arms.
Socialism offers the only hope to avoid another major war, improve conditions for working people – the 99 percent – and prevent environmental collapse.
The capitalist menace must be overcome.

I agree to you. We could quite exactly see through the person of Michail Gorbachev in the GDR. If one reads up his statements till this day, one can see that Gorbachov always an anti-Communist. He has many bowls – like an onion. Very clearly this has also analysed the historian Dr. Kurt Gossweiler. His noteworthy article has also appeared in Spanish. I do not know whether there is an English translation. But it could explain the “riddle” of the Gorbimania.

“While the growth of communist economies was the subject of innumerable alarmist books and polemical articles in the 1950s, some economists who looked seriously at the roots of that growth were putting together a picture that differed substantially from most popular assumptions. Communist growth rates were certainly impressive, but not magical. The rapid growth in output could be fully explained by rapid growth in inputs: expansion of employment, increases in education levels, and, above all, massive investment in physical capital. Once those inputs were taken into account, the growth in output was unsurprising – or, to put it differently, the big surprise about Soviet growth was that when closely examined it posed no mystery. This economic analysis had two crucial implications. First, most of the speculation about the superiority of the communist system – including the popular view that Western economies could painlessly accelerate their own growth by borrowing some aspects of that system – was off base. Rapid Soviet economic growth was based entirely on one attribute: the willingness to save, to sacrifice current consumption for the sake of future production. The communist example offered no hint of a free lunch. Second, the economic analysis of communist countries’ growth implied some future limits to their industrial expansion – in other words, implied that a naive projection of their past growth rates into the future was likely to greatly overstate their real prospects. Economic growth that is based on expansion of inputs, rather than on growth in output per unit of input, is inevitably subject to diminishing returns. It was simply not possible for the Soviet economies to sustain the rates of growth of labor force participation, average education levels, and above all the physical capital stock that had prevailed in previous years. Communist growth would predictably slow down, perhaps drastically.”